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The incidence of Cash for Clunkers: Evidence from the 2009 car scrappage scheme in Germany

Author

Listed:
  • Ashok Kaul

    () (University of Zurich
    Saarland University
    IPE – Institute for Policy Evaluation)

  • Gregor Pfeifer

    () (University of Hohenheim)

  • Stefan Witte

    () (IPE – Institute for Policy Evaluation)

Abstract

Abstract This paper investigates the German car scrappage program, focusing on the incidence of the premium. We ask how much of the €2500 ($3500) buyer subsidy is actually captured by the demand side. More precisely, we analyze the program’s impact on different car segments, allowing for heterogeneity in incidence at different points in the vehicle price distribution. Using a unique microtransaction data set, we find that the incidence of the subsidy strongly and significantly varies across price segments. Subsidized buyers of cheap cars paid a little more than comparable buyers who did not receive the subsidy, indicating incidence amounts slightly below 100 %. For more expensive vehicles, subsidized buyers were granted large extra discounts on top of the government premium, translating into incidence amounts considerably greater than 100 %. Taken together, this results in an aggregate incidence amount of up to plus €350 million, suggesting that the positive effect for expensive cars overcompensates the negative effect for small cars.

Suggested Citation

  • Ashok Kaul & Gregor Pfeifer & Stefan Witte, 2016. "The incidence of Cash for Clunkers: Evidence from the 2009 car scrappage scheme in Germany," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 23(6), pages 1093-1125, December.
  • Handle: RePEc:kap:itaxpf:v:23:y:2016:i:6:d:10.1007_s10797-016-9396-1
    DOI: 10.1007/s10797-016-9396-1
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Xavier D'hautfoeuille & Isis Durrmeyer & Philippe Février, 2014. "Automobile Prices in Market Equilibrium with Unobserved Price Discrimination," Working Papers 2014-38, Center for Research in Economics and Statistics.
    2. Pless, Jacquelyn & Van Benthem, Arthur, 2017. "The Surprising Pass-Through of Solar Subsidies," CEPR Discussion Papers 11908, C.E.P.R. Discussion Papers.
    3. repec:eee:pubeco:v:155:y:2017:i:c:p:93-107 is not listed on IDEAS
    4. Jacquelyn Pless & Arthur A. van Benthem, 2017. "The Surprising Pass-Through of Solar Subsidies," NBER Working Papers 23260, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    Cash for Clunkers; Scrappage scheme; Incidence; Subsidy; Pricing;

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment

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